SCHD, DGRW, DIVO ETFs offer income options above 4.6% Treasury
With the 10-year Treasury yield at 4.6%, dividend ETFs SCHD, DGRW and DIVO are providing distinct strategies for investors to generate cash flow without liquidating principal.
The 10-year Treasury yield sitting at 4.6% has established a strict new benchmark for equity income strategies. Three exchange-traded funds are navigating this environment by offering distinct mechanisms to generate cash flow without forcing investors to liquidate principal. The Schwab U.S. Dividend Equity ETF (SCHD), the WisdomTree U.S. Quality Dividend Growth Fund (DGRW), and the Amplify CWP Enhanced Dividend Income ETF (DIVO) each clear the Treasury hurdle, but through entirely different portfolio constructions.
SCHD serves as a low-cost, quality-screened core holding. Tracking the Dow Jones U.S. Dividend 100 Index, it requires companies to maintain a decade of consecutive dividend payments. Surviving stocks are then ranked by cash flow to debt, return on equity, dividend yield, and five-year dividend growth. Crucially, the index rebalances annually, systematically ejecting businesses whose fundamental metrics decay before their payouts are actually cut.
The portfolio holds roughly 100 large-cap names, spreading risk across healthcare, energy, defense, telecom, staples, and technology. No single stock exceeds 4.3% of assets. Top weights include Bristol-Myers Squibb at 4.26%, Merck at 4.14%, ConocoPhillips at 4.10%, Lockheed Martin at 4.07%, and Chevron at 4.04%. With a beta of 0.70, SCHD historically exhibits significantly less drawdown risk than the broader market. Its 0.06% expense ratio minimizes fee drag, yielding 3.2% currently.
Growth and Yield Alternatives
DGRW occupies the opposite end of the spectrum. Rather than maximizing current yield, it targets businesses that aggressively reinvest cash flow to compound their future payouts. This capital appreciation focus has resulted in a 256% total return over the past 10 years.
DIVO addresses the need for immediate, high-current income. The fund holds approximately 25 blue-chip stocks and writes tactical covered calls against those positions. This options overlay lifts the current yield to 6.4%, distributed monthly, while keeping investors fully invested in the underlying equities.
For long-term investors, combining these strategies covers the full yield-versus-growth matrix. By matching annual expenses to fund distributions, investors can avoid selling shares entirely. This structure effectively neutralizes sequence-of-returns risk, a critical consideration for multi-decade portfolios drawing down in volatile markets.
